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Eurozone 2016 inflation expectations fall to 0.7%: ECB survey

Friday, January 22, 2016 - 19:26

[FRANKFURT] Euro area inflation expectations fell over the past quarter and even longer-term projections are on the decline, the European Central Bank's Survey of Professional Forecasters showed on Friday.

With inflation prospects fading and growth risks on the rise, the ECB promised on Thursday to review and possibly recalibrate its policy stance in March, a strongly worded statement taken by analysts and investors to almost certainly mean policy easing at the next rate meeting.

The ECB's survey of 57 forecasters showed 2016 inflation expectations falling to 0.7 per cent from 1.0 per cent seen three months ago, well short of the ECB's target of close but below 2 per cent.

For 2017, the survey sees inflation at 1.4 per cent, down from 1.5 per cent, while the initial 2018 projection is for 1.6 per cent.

Expectations for 2020, defined as "longer term" were also cut to 1.8 per cent from 1.9 per cent, a possible concern for the ECB as it shows a further erosion in confidence that it will be able to revive inflation after years of close to zero price growth.

Although the survey does not represent the ECB's opinion, the bank's Governing Council weighs its conclusions and often cites the survey in its own analysis.

Eurozone inflation is hovering near zero on sharply lower commodity prices, slack in the economy, anaemic bank lending, the lack of fiscal accommodation and high unemployment.

The ECB is buying 60 billion euros worth of assets per month to kick start price growth but crashing oil prices have worked against it, forcing the bank last month to cut its deposit rate and extend the asset buys by six months.

REUTERS